Favor Adds $22M to Expand Again After Cutting Delivery Outside Texas

Austin—Favor, the delivery startup that shuttered all of its operations outside of Texas earlier this year, has raised a $22 million Series B round of funding to add more cities to the list of 15 in Texas where people can use its app.

The startup, which connects people wanting a something delivered via its app with a “runner” who will make the delivery, had previously operated in 12 other cities outside of Texas. Favor started phasing out those operations in late 2016 as part of an effort to achieve profitability, President and CEO Jag Bath said at the time.

Now, Favor says it is profitable and is using its new funding to expand again, first in Texas and then elsewhere. The company had always planned to return to other states, which may happen after it achieves a few profitable quarters through 2018, Bath wrote in an e-mail.

Favor also plans to use some of the funding on product development, including a new Web app for desktop computers that aims to encourage ordering from corporate customers and large groups and another called Favor Fleet, which helps small- and medium-sized businesses offer delivery to their customers, Bath wrote.

Austin venture capital firm S3 led the funding round, as it did with the company’s Series A financing in 2015. Likewise, prior investors Silverton Partners and venture capitalist Tim Draper also participated. The company has raised $34 million to date, Favor said in a press release.

Founded in 2013 by Zac Maurais and Ben Doherty, Favor said in the release that it expects the sales made through its app are expected to rise to $100 million this year, up from the $60 million it reported in 2016. Bath, who previously worked as an executive at RetailMeNot and Gilt Groupe, was hired as the CEO in September 2015.

Favor is in a competitive space for the delivery of food and other products. Companies such as Wisconsin-based EatStreet and Boston-based alcohol delivery service Drizly have talked publicly about their expansion plans. Other competitiors include Postmates, DoorDash, UberEats, BiteSquad, and Chicago-based Grubhub (NYSE: GRUB), which signed an agreement to acquire Boston-based rival Foodler earlier this year.

Favor’s previous decision to narrow its operations to only Texas was an intentional way to reach profitability, which the company says it has now accomplished. San Francisco-based Postmates, on the other hand, reportedly doesn’t expect to reach profitability until 2018, according to a leaked presentation that Quartz reported on in December 2016.

David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at dholley@xconomy.com Follow @xconholley

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